Green Mountain Coffee Acquires Diedrich

Dec 11, 2009 6:02 AM  By

In an apparent move to acquire every licensee of its Keurig K-Cup business, Green Mountain Coffee Roasters announced Dec. 8 it has bought Diedrich Coffee for about $290 million.

The deal ends a bidding war with Peet’s Coffee & Tea, which had bid $213 million during an agreement announced in early November. Green Mountain will pay Peet’s an $8.5 million termination fee after the previously announced merger agreement.

Diedrich makes the individual servings of coffee and tea used in Green Mountain’s Keurig coffee makers. “This combination further advances our objective of becoming a leader in the highly fragmented and competitive coffee and coffee-maker businesses,” said Green Mountain CEO Lawrence Blanford.

Waterbury, VT-based Green Mountain Coffee Roasters last month acquired the coffee brand and wholesale operations of Toronto-based Timothy’s Coffees of the World. Green Mountain paid $157 million in cash for the company, which had been an affiliate of private equity firm Sun Capital Partners.

Green Mountain had also purchased Tully’s Coffee in September 2008.

“The K-Cup business is amazingly profitable,” says Chris Kampe, managing director for investment firm Tully & Holland. Keurig licensed many coffee companies in the U.S. and Canada to produce the K-Cups for the machine, Kampe says.

Green Mountain, which first invested in Keurig in 1996, acquired the final 65% of Keurig for $104.3 million in June 2006. Kampe says Green Mountain’s latest string of acquisitions–Timothy’s, Tully’s, and Diedrich–shows the company’s desire to buy up all the other licensees.